With a large number of states changing their laws regarding recreational and medical marijuana, sellers were faced with a unique problem. While they may have been selling legally under state law, the sale was still illegal under Federal law. And while President Obama’s administration had directed Federal law enforcement to not enforce the laws, that didn’t make the sale legal. Since the money was gained in violation of federal law, banks were nervous to accept the proceeds. Laws prevent the banking industry from accepting money it knows comes from illegal sources. Typically designed at preventing money laundering of illegal proceeds, the legal marijuana and banks found themselves in a difficult position.
Last week the administration took a major step by laying out a framework whereby banks could accept this money and not fear criminal charges for harboring illicitly obtained funds. While the President’s administration has laid out a roadmap some business leaders are still nervous about potential liability for accepting drug money, even if it is from legal operations inside the state. The guidance calls for banks to review the business operations of the marijuana distilleries they are doing business with and ensure that all business practices are legitimate. They map also included a number of issues that banks should look out for and monitor to ensure that their clients are not violating either Federal or state law.
In response to the banking issues some marijuana shops have begun operating on an all cash basis, which makes operating a business very difficult.
